“Their credit union should not be hindered, in any unreasonable way, from its ability to work with them to prevent default or worse,” the letter said. “As the NCUA knows, small businesses are the engine of the nation's economy and employ millions of Americans. Their capital needs, including their occasional need to restructure a loan, should be accommodated as long as the lender follows safe and sound businesses lending principles.”

It added, “NAFCU strongly believes that failing to extend the proposed regulatory relief to MBL workouts would perpetuate an unnecessary obstacle for credit unions to accommodate their business members.”

The NCUA's current policy on TDR reporting had drawn complaints from CUs that, in some cases, it actually led them to favor foreclosing on mortgage loans over restructuring them.

But NAFCU did not support the NCUA proposal's other elements, a requirement that credit unions have a written policy in place for TDR loans. Most credit unions already have such a policy, NAFCU wrote, but it drew a line at requiring such in regulation.

“As a general matter, we oppose the proposed requirements because of the inflexibility of regulation where flexibility for management is what is needed,” NAFCU added. “We are also gravely concerned about the continued increase on justifying new regulations on risk management.

“Thus, for example, while it may be appropriate for one credit union's board to establish, by policy, a set of limits on loan workouts, another credit union's board may find that it is against the best interest of its members to tie management's hands in this manner,” the association argued.